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1 Financial Statements Bulletin 2018 Efecte 1 FINANCIAL STATEMENTS BULLETIN 2018 EFECTE PLC -- FINANCIAL STATEMENTS BULLETIN -- 7 MARCH 2019 at 14.00 Efecte Plc's Financial Statements Bulletin 2018 - SaaS grew by 24% - Order intake in Germany exceeded one million euro • Net sales grew by 15% to 12.2 million euro. (17% growth without perpetual licenses) • SaaS grew by 24% and was 47% of total net sales • Services grew by 20% and was 38% of total net sales • Investments into accelerating international growth decreased profitability, as anticipated. EBITDA was -2.0 million euro and operating profit -2.4 million euro • Growth accelerated in Germany toward year-end and order intake exceeded one million euro • Guidance: In 2019 SaaS net sales is expected to grow by over 20% and profitability to improve from the comparison period Group key figures 1000 EUR 7-12/2018 7-12/2018 2018 2017 Net sales 6 240 5 577 12 224 10 615 EBITDA -950 208 -1 988 305 EBITA -1 134 68 -2 339 41 Operating profit -1 143 -11 -2 382 -110 Profit for the period -1 163 -730 -2 419 -841 Profit for the period (adjusted for -1 163 -16 -2 419 -122 listing cost) Earnings per share, eur -0.20 -0.16 -0.42 -0.19 Adjusted earnings per share, eur -0.20 0.00 -0.42 -0.03 Equity per share, eur 0.59 1.02 0.59 1.02 SaaS MRR 523 425 523 425 CEO Niilo Fredrikson: In 1-12/2018 Efecte's net sales grew by 15% to 12.2 MEUR (10.6 MEUR in 2017). Our current main businesses grew more rapidly: net sales of SaaS grew by 24% and services by 20%. Total growth of net sales was significantly impacted by fluctuation in our old license business: net sales of licenses decreased by 21% and related maintenance decreased by 11%. Without licenses, the growth in 2018 was 17%. Our main business, cloud services, SaaS, grew steadily the whole year. Monthly recurring SaaS revenue (MRR) was 23% higher than in the previous year-end. In Finland a key factor in growth was expansions by the current customers, either more users or new solution areas. Our international business generated approx. 15% of our net sales, growing slightly faster than Finland, but below our targets. Especially the development of Sweden and Denmark disappointed, with employee churn being one of the contributing factors.. We selected a new country manager for Sweden in late 2018 and he started before year-end. In Germany the year was a period of strong investments. Earlier actions started to bear fruit in the last few months of the year and we won several new customers. The total order intake in Germany during the year exceeded one million euro. The orders received in the last few months will start to contribute into net sales from 2019 onward. In 2018 the net sales in Germany tripled to approx. 0.4 MEUR and the growth is expected to continue this year. 2 FINANCIAL STATEMENTS BULLETIN 2018 The forward-looking growth investments, especially the significant increase in the number of employees in Germany and Sweden, have decreased profitability in the review period, but were necessary for accelerating the international growth. Year 2018 was in many ways significant for Efecte. Efecte celebrated its 20 years anniversary, and as growth continued, actions were needed to accommodate the new scale. Due to our growth, a significant portion of our employees have started during the last year and a half, which has caused us some operational pains and need for short term training & development actions on culture, processes and technology. I moved from a board member to CEO in September, and we started the planning work for Efecte's next growth phase. We evaluated strategy, organization and processes, and did the first changes in late 2018. These actions were aimed to bring us benefits also in the short term, especially to accelerate sales in Germany, decrease employee churn and increase cloud operations efficiency. We succeeded in these three goals in the last quarter. In 2019, we will continue to implement our strategy aiming for international growth. We have also refined our strategy by defining growth of SaaS net sales and customer success as key targets and have modified our long-term financial targets to match this. We will focus on landing our strategy across our organization and will increasingly highlight in our messaging the versatility of our service management offering. We have also defined local service providers as a key customer segment in addition to mid-sized organizations. Successes in 2018 have shown that we are competitive in this segment, and more focus will help us to succeed in international competition. In addition to actions targeting growth, we will in 2019 continue actions to improve our operational efficiency to better reap the scale benefits from our growth and through that improve our profitability. For example, we will continue to increase automation in our cloud operations and better share our consultancy resources between our countries in cross-border customer deliveries. I have now served as the CEO for almost half a year. During these first months I have actively met with our customers and employees in different countries. This has further strengthened my belief in Efecte's success, as our product portfolio has potential, we have motivated employees and a strong customer base, together with whom we can continue growth. Long-term financial targets Efecte aims for over 20% annual organic growth of SaaS net sales on average in 2019 - 2022. Substantial investments in international growth and product development will decrease operating profit in the next few years, but the company aims for a double-digit operating profit percentage by the end of the strategy period. Guidance for year 2019 In 2019 SaaS net sales is expected to grow by over 20% and profitability to improve from the comparison period. Additional information: CFO Hannu Nyman, +358 50 306 9913 CEO Niilo Fredrikson, +358 50 356 7177 Certified adviser: Evli Bank Oyj, tel. +358 40 579 6210 3 FINANCIAL STATEMENTS BULLETIN 2018 This release is unaudited. The amounts in this report have been rounded from exact numbers. REVIEW ON 7-12/2018 Efecte's net sales in 7-12/2018 were 6.2 million euro and growth was 12%. Growth without perpetual licenses was 16%. EBITDA was -1.0 million euro and operating profit -1.1 million euro. Net sales by type Net sales, 1000 EUR 7-12/18 7-12/17 2018 2017 SaaS 3 024 2 456 5 754 4 645 Licenses 184 367 487 615 Maintenance 646 712 1 292 1 453 Services 2 386 2 041 4 691 3 901 Group total 6 240 5 577 12 224 10 615 In 7-12/2018 the main businesses SaaS grew by 23% and services by 17%. Net sales of perpetual licenses decreased by 50% from previous year and related maintenance decreased by 9%. In the fourth quarter the growth was 18% without perpetual licenses. In Finland the business grew in a stable fashion. Sweden developed weaker than our expectations and we changed the country manager there. In Germany the marketing and sales activities started to bear fruit toward the year-end, and we won several good new customers, whose impact on net sales will materialize from 2019 onward. Thanks to the good performance in the last few months, the total order intake for the whole year exceeded one million euro. The profitability in the latter year-half was negatively affected by approx. 0.2 MEUR costs related to the new CEO and the change of the country manager in Sweden. YEAR 2018 EFECTE IN BRIEF Efecte is a Finnish software company offering cloud-based Service Management solutions and related supportive professional services. With Efecte’s software, organizations can flexibly manage all internal and external services, for example, an IT, HR or finance department’s services, customer service and access rights. Efecte is one of the leading software vendors in its field for medium-sized and public organizations in Finland and the Nordic countries. The company was established in 1998 and is listed on the Nasdaq First North Helsinki marketplace. Efecte operates in Finland, Sweden, Germany, and Denmark. Efecte's business is based on its own software products and the services that support them. Software products that are delivered primarily as cloud services form the core of the company’s business. Services that support software business include for example implementation projects, integrations, training and continuous development of customers' solutions. NET SALES AND PROFIT Efecte's net sales in 1-12/2018 were 12.2 million euro (1-12/2017: 10.6 million euro). Net sales by type were: SaaS 5.8 MEUR (4.6 MEUR), Services 4.7 MEUR (3.9 MEUR), licenses 0.5 MEUR (0.6 MEUR) and Maintenance 1.3 MEUR (1.5 MEUR). Net sales for cloud-based solutions continued to grow substantially. SaaS grew by 24% and Services grew by 20%. Net sales of perpetual licenses decreased by 21% and related maintenance decreased by 11%. Total growth of net sales was 15%. Without licenses the growth was 17%. 4 FINANCIAL STATEMENTS BULLETIN 2018 The international net sales grew slightly more rapidly than net sales in Finland and the foreign subsidiaries generated 1.8 MEUR (1.5 MEUR) net sales, corresponding to 15% of total net sales (14%). The recurring revenue (SaaS and maintenance) was 7.0 MEUR (6.1 MEUR), corresponding to 58% of the net sales (58%). Efecte's EBITDA was -2.0 MEUR (0.3 MEUR) and operating profit was -2.4 MEUR (-0.1 MEUR).
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